Finding the right insurance for your industrial engineering business is important in protecting your business and achieving long-term success.
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Simply running a business comes with its fair share of risks. Aside from the liability of professional mistakes and errors, there are other dangers to be aware of, like accidents or natural disasters. No business is risk-free. In the event that someone takes legal action against you or an unfortunate event occurs, you will be in a better position to protect your financial assets with the right business insurance coverage.
You may want to purchase business insurance if:
- You would like to insure your services and practice against claims of poor performance or errors in your work
- You store employee or customer data like Social Security numbers or financial information
- You employ others and provide benefits like health or life insurance
- You lease or own your own office building
- You store valuable equipment or property in your office
- Clients or vendors visit your office
What insurance coverage do I need as an industrial engineer?
Most businesses share common insurance needs, which include such policies as general liability insurance and commercial property insurance. For industrial engineers, it is particularly important to obtain professional liability insurance, given the level of technical skill required for your profession and the amount of complexity in the product that you work on. Mistakes are bound to happen, and an unhappy client deciding to file a lawsuit is an all-too-common occurrence in engineering work. Below we explain some of the more common business insurance coverages that industrial engineers should consider.
Professional Liability Insurance
Industrial engineering work involves technical expertise and the ability to understand complex digital models, where one small mistake or omission could lead to the failure of a system. Because of this possibility for error, industrial engineers can be the target of lawsuits from unhappy clients. Even if you perform your job correctly, a client can still sue you if they believe your work was faulty in some way. Professional liability insurance, also known as errors & omissions insurance, can protect you from client lawsuits that stem from the performance of your professional work. Professional liability insurance is one of the most important coverages an industrial engineer can obtain, as these types of professionals are highly susceptible to professional liability claims. Covered areas for professional liability insurance include negligence, misleading statements, performance, and breach of duty.
- Negligence: Your company is hired to design the conceptual layout of a ship repair maintenance facility. Unfortunately, one of your engineers fails to perform due diligence and designs a plan that does not take into account the extra size requirements of cruise ships. Because you won’t modify the work without more payment, the company you performed the work for decides to sue.
- Lawsuit without merit: A California soup manufacturing plant hires your firm to reduce the total number of monthly injuries on their assembly line. Your work successfully accomplishes this goal, eliminating all major injuries and reducing minor injuries from an average of ten per month to two. However, the manufacturing plant had the unrealistic view that your changes would result in zero minor injuries over a year-long period and are therefore unsatisfied with your work. They want to sue you for negligence.
General Liability Insurance
General liability insurance, or commercial general liability, can protect your business from lawsuits that claim property damage or bodily injury caused by your business or your employees. This is a common coverage for all business types, as accidents can happen no matter what industry you’re in. A client visiting your office may slip and fall, or one of your employees may accidentally damage a client’s property—these sorts of events would be covered under general liability. The four types of coverage included in general liability insurance are: products & completed operations, property damage, bodily injury, and personal & advertising injury.
- Property damage: An airline company is vetting your firm for a project to improve their barcode scanning system. When you visit their offices for an introductory meeting, you ask to check out their technology. While looking into their systems, you accidentally damage the hardware and take it offline. The airline must bring in the company that created their original system to restore it, which takes weeks. They want to sue you for property damage.
- Bodily injury: One of your employees is on the floor of a major cigarette manufacturing company in the Midwest. While tinkering with the machinery, he places sharp spare parts on the ground. An employee of the cigarette company accidentally trips and falls over them, severely lacerating her foot and arm. She must go to the hospital and receive stitches. The cigarette company decides to sue you for bodily injury.
Workers’ Compensation Insurance
Workers’ compensation insurance provides financial benefits to employees who suffer work-related illnesses or injuries while employed by your business. In many states, businesses that have employees are required to carry workers’ compensation insurance. In exchange for accepting workers’ comp benefits, an injured employee agrees to not sue your business for the injury. Workers’ compensation insurance is no-fault, which means that it pays benefits regardless of whether the employer or employee is at fault for the injury.
Workers’ compensation can cover the costs of:
- Funeral expenses
- Disability benefits
- Medical expenses
- Rehabilitation costs
- Death benefits
- A portion of lost wages
- One of your employees is sent to an auto manufacturing plant to implement a new method for distributing tires. He is required to walk through a kitchen area to get to the plant’s main office, and he slips in a pool of water on the linoleum tile. He is rushed to the hospital, where it is discovered that he has pulled a back muscle. He cannot return to work for three weeks. Workers’ compensation covers the cost of his hospital bills, as well as any income he lost while he was out of work.
Commercial Property Insurance
Commercial property insurance helps cover the buildings that your business owns, as well as other owned property and property under your care. Similar to how property insurance works for your home, commercial property protects you if an unforeseen accident or natural disaster hits your business property, providing you with the funds that can help your company recover. Commonly covered perils include fire, lightning, explosion, windstorm, hail, theft, and vandalism.
- Buildings: You throw an office holiday party every year. This year, your new office manager decides to go all out. She fills the office with Christmas-themed candles. While dancing, a few candles are accidentally knocked to the ground, starting a small fire. After the fire is extinguished, you see that the damage is so extensive that one of the walls will need to be replastered.
- Contents: Your firm provides iPads and mobile phones to your employees to make field work more efficient. The electronics are all stored in a supply closet in your office. Overnight, a pipe bursts above the closet and damages the equipment. Commercial property would cover the damages.
Commercial Auto Insurance
If your firm owns or leases vehicles or your employees use their own vehicles for company purposes, commercial auto insurance is an important coverage to obtain. In the event of an accident involving your vehicles, commercial auto insurance can provide financial protection. This type of insurance has both liability and property components. The liability component protects your business if one of your workers is at fault for causing a crash and causes bodily injury or damages someone else’s vehicle or property. The property component of commercial auto insurance protects the value of your vehicle against crashes, theft, and other perils.
- Your firm is working with a hospital located in downtown Cincinnati to streamline their intake procedures. One of your employees uses a company car to visit the site, which is 30 minutes away. On the way back to the office, he gets into a fender bender on the freeway that the court determines he was responsible for. Commercial auto insurance would cover the damages.
Business Owner’s Policy
A business owner’s policy, also known as a “BOP,” is a special bundling of policies that can provide coverage for risks that are common to small business owners. BOPs combine property, general liability, and business income and extra expense insurance coverages for qualified small businesses. Importantly, a business owner’s policy can help you save money, with lower premiums than buying the individual coverages separately.
As an industrial engineer, it is your job to improve the processes and systems that other businesses rely on so that they can perform their work more safely and efficiently. Your work requires great attention to detail, and many of your projects may be incredibly complex. Though you may be certified and capable, even a small mistake can lead to a bigger problem for your clients, raising the potential of client lawsuits against your firm.
Your firm also faces a number of more commonplace risks and liabilities, from property damage due to a natural disaster to an employee who is physically injured on the job. Having a comprehensive business insurance plan in place can help protect you and your employees in a time of need. Not only will the right insurance provide financial security, but it will also give you and your team the peace of mind to focus on what you do best—helping to build efficient industrial systems for your clients.